Interest Rate: The Last Six Months
Of Federal Activity

About

This Report

This is a computer-generated report that shows all of the federal activity with respect to the keyword "Interest Rate" over the last six months. This is a demonstration of the power of our government relations automation software.

Hansard

House: 11 Speeches
Senate: 16 Speeches

House Senate

Bills

Active: 0

Regulations

Filed: 0
Proposed: 0

The House

Mr. Joël Godin

October 5th
Hansard Link

Government Orders

“...y are there so many deficits? Why are they spending irresponsibly? It is going to be great fun when interest rates begin to rise and we are hit with an economic crisis. Where are the oxygen and the sp...”

Ms. Jenny Kwan (Vancouver East, NDP)

October 2nd
Hansard Link

Routine Proceedings

“...esperately in need of an alternative to payday lending. We know, in our communities, that often the interest rates offered by payday lenders are exorbitantly high. Many of the people who are most marg...”

Hon. Pierre Poilievre (Carleton, CPC)

September 28th
Hansard Link

Government Orders

“... that amount will rise to $40 billion, a two-thirds increase in just a few years, as debt rises and interest rates rise simultaneously to have a compounding effect of transferring more and more wealth...”

Hon. Steven Blaney (Bellechasse—Les Etchemins—Lévis, CPC)

May 29th
Hansard Link

Government Orders

“... every year. That is four times what the Liberal Prime Minister promised. We are also seeing rising interest rates right now, which means that the interest on the national debt will grow to nearly $40...”

Hon. Pierre Poilievre (Carleton, CPC)

May 8th
Hansard Link

Business of Supply

“...ear fixed mortgages. In the case of RBC, they went up by 45 basis points or almost 10% of the total interest rate charged to the average mortgage borrower, from 5% to roughly 5.69%. This is on top of record gas prices that are afflicting motorists, particularly in British Columbia but starting to affect people right across the country.

One of the root causes of increased costs for consumers is most often forgotten, and that is the cost of government. Government represents over 40% of our entire economy. Thus, when the cost of government rises, the cost of everything else rises with it, and that is the focus of my remarks today. Let me dissect how growing government costs cascade down to consumers at all levels.

Let me start with the proposed Liberal carbon tax. The government has said it will impose a tax on anything that requires fossil fuels to produce or deliver. What does this mean to the average Canadian consumer? The government admits that the carbon tax would increase the cost of gasoline by at least 11¢ a litre at the pump. The Liberals admit that the average households would pay roughly $200 more per year to heat their homes. That is all they are prepared to admit.

They have not calculated how much this tax would increase the cost of groceries, which of course are transported by truck and rail. Therefore, when the transportation costs go up, the costs are passed on to consumers at the end of the day. The Liberals have not revealed how much costs will increase for other household expenses, such as electricity. In many, if not most, provinces, electricity is produced by some form of fossil fuel, whether natural gas, coal fire, or some other source that would be affected by this carbon tax. Even people taking transit might end up paying more for their transit passes because so many of our buses continue to run on gas, diesel, or natural gas, all of which will become more expensive once this carbon tax is fully imposed.

Finance Canada has released documents conceding that the cost of the carbon tax would cascade down to consumers through higher prices. I have obtained documents from Finance Canada estimating how much those costs would be for households, depending on their income. The only problem is that the government blacked out all the numbers on those documents. We know from the evidence I have obtained that there will be higher prices for Canadian households; we just do not know how much, because the government is concealing that information.

Before the House now is Bill C-74, the budget bill, which would impose a federal carbon tax of $50 per tonne of greenhouse gases. (1015)

The government is asking our permission, as the House of Commons, which has the exclusive power of the purse, to give the finance minister permission to impose this tax, without telling us what the tax will cost.

The basic principle of the power of the purse is that the government cannot tax what Parliament has not approved. However, Parliament cannot approve what it does know. Right now, we do not know how much this tax will cost average Canadians.

There is a whole series of estimates. Some estimate it will be $1,000 a household. Some estimate more, some slightly less, but the government will not say, even though it has performed all of the calculations. It knows; it just does not want Canadians to know.

This is a particularly insidious tax because all of its costs are embedded in other products. For example, the price of fresh fruit might become more expensive for a single mother, but she will not know what share of the extra cost of that fruit is the tax. She might assume that it is just that her local grocer has raised prices. In this way, the government is attempting to blame local shopkeepers, grocers, and other small businesses for rising prices that are really imposed by government.

An hon. member: What about people in the north?

Hon. Pierre Poilievre: People up north, my colleague rightly points out, will face even greater costs because of the enormous price of heating their homes in -40°C or -45°C weather and the enormous cost of transporting oneself across enormous distances. All of these activities will become exponentially more expensive.

The government says, “Do not worry; it is all revenue neutral.” That is another one of these fancy political terms that politicians like to use that cause most eyes to glaze over, including in the case of many of the people who use the terms themselves. I asked the finance minister, “Does revenue neutral mean free?” He could not answer the question.

I am not sure if he has answered a single question in his two years in Parliament, but he could not answer when on more than a dozen occasions I asked him what this carbon tax would cost. He can not and he will not say.

How can we even know that it is revenue neutral if the government will not tell us what the original cost is? How can we know if the average family is getting back what it puts in, in taxes, if we do not know what it is in the first place? The finance minister was in committee the other day, and he said that he would tell us in September, after he is given permission to impose it.

That would be like someone going to a used car dealer and having the dealer say he will sell the car and put it on a credit card, but the person can only find out the price for the car after the purchase is made—and by the way, there is no money back if the person does not like what he paid. In other words, if we make the deal now and agree to make the payment today, seven or eight months down the road the government will tell us what came out of our bank account.

That is not how business is done in a civilized G8 democracy. Here in Canada, government has the responsibility to tell people what it will cost before people are required to pay. That is why we are going to continue to fight against this carbon tax cover-up.

The carbon tax is only one area where the government is raising the cost of living. Eighty percent of middle-class Canadians are paying higher income tax today than when the Prime Minister took office. That number will rise to 92% of middle-class Canadians, and their average cost within the next three years will be over $2,000 in new payroll taxes, new income taxes, and other taxes. That is according to the prestigious Fraser Institute, which has conducted this calculation.

Canadians are paying more of all sorts of taxes. They are also paying more for their debt. Their debt levels are being hit with higher interest rates. As I pointed out earlier, major banks are raising the cost of interest on Canadians,...”

Ms. Irene Mathyssen (London—Fanshawe, NDP)

April 27th
Hansard Link

Routine Proceedings

“... to payday loan lenders. These are people who are crippling the poor and marginalized with usurious interest rates.

There are 3,800 Canada Post outlets that already exist in rural and remote are...”

Mr. Sean Fraser (Central Nova, Lib.)

April 19th
Hansard Link

Government Orders

“...he economy.

We need to be taking advantage of the opportunities that present themselves. When interest rates are at a historic low, and we have an opportunity to achieve the kind of economic gro...”

Mr. Michael Cooper (St. Albert—Edmonton, CPC)

April 19th
Hansard Link

Government Orders

“...ed the Conservative jackpot. Then, to top it off, there were a lot of external factors, such as low interest rates, low inflation, a housing bubble that has resulted in an employment boom and revenue ...”

Hon. Maxime Bernier (Beauce, CPC)

April 19th
Hansard Link

Government Orders

“...ing? It is going across the border to the United States where President Trump lowered the corporate interest rate from 35% to 21%. The U.S. is attracting capital because the Government of Canada is ra...”

Hon. Kevin Sorenson (Battle River—Crowfoot, CPC)

April 18th
Hansard Link

Government Orders

“... billion, three times that which was promised. We now have a national debt of $669 billion, and the interest rate for that crippling debt is rising. This year it will be $26 billion and by 2022 it is ...”

Hon. Pierre Poilievre (Carleton, CPC)

April 16th
Hansard Link

Government Orders

“...ontinue. Oil prices have doubled. The American economy is roaring. The world economy has picked up. Interest rates have been at historic lows. The real estate bubble in Toronto and Vancouver has creat...”


The Senate

Hon. Art Eggleton

September 25th
Hansard Link

Bankruptcy and Insolvency Act Bill to Amend—Second Reading—Debate Adjourned

“...ature of their business is risk and, routinely, credit risk is addressed through loan pricing — the interest rates which lenders charge. Why should pensioners be forced to carry this credit risk inste...”

Senator Bellemare

September 25th
Hansard Link

Relevance of Full Employment Inquiry—Debate Concluded

“...or those responsible for setting monetary policy may react and slow down economic growth by raising interest rates for fear of seeing salaries and prices increase too much. Currently, in a number of r...”

Yves Giroux, Parliamentary Budget Officer Nominee

June 20th
Hansard Link

Parliamentary Budget Officer Yves Giroux Received in Committee of the Whole

“...conomy, including setting and achieving budgetary goals, projections of economic growth, inflation, interest rate, and job growth, government spending, cost cutting exercises, changes to the tax regim...”

Hon. Pierrette Ringuette

June 19th
Hansard Link

Criminal Code Bill to Amend--Third Reading--Debate Continued

“... loans that hit those who have the least ability to pay but, ironically, must deal with the highest interest rate. High interest on some student credit cards, excessive late charges on others and instalment loans, et cetera, are examples, and even some phone companies charge 59.99 per cent on late payments. I acknowledge that there are differing opinions on this. All committee members agreed that 60 per cent was too high. Then, honourable senators, it was a little bit like “The Price is Right” at our committee. “Higher, Bob. No, lower, Bob. No, higher, Bob.” Finally, Senator Tannas played Vanna, and the bill was amended to a rate of 45 per cent with a three-year review period. I am very pleased with the addition of the review mechanism. I believe it will be useful to maintain a reasonable rate. On the specific level of the rate, while I am encouraged with the support for lowering the rate, I am happy to have this debate on what the right level should be. I do believe that a rate of 45 per cent is way too high. I will propose an amendment, at the end of my speech, to lower it to a rate of 35 per cent, which I believe to be a reasonable compromise for the next three years. Honourable senators, why do we need to lower the limit? The Bank of Canada has recently reported that high household debt remains an elevated vulnerability to the Canadian financial system. That is particularly true for low- and middle-income Canadian families. According to Statistics Canada, current household credit market debt is equal to 168 per cent of household disposable income. It has dropped slightly in the last two years but remains way too high if an economic crisis arises. This is an issue of economic stability for our country. It is also an issue of those who can least afford to pay are hit with the highest rates, perpetuating a cycle of debt that is hard to get out of and putting pressure on our social support systems, be they federal, provincial or municipal. Nearly half of Canadians, according to Ipsos Reid, are $200 away from insolvency after paying their monthly bills. A sudden financial crisis, such as a car or a house repair, medical prescriptions for a child or the elderly, can start a spiral of debt they cannot get out of. Meanwhile, the big five banks earned $10.6 billion profit in the second quarter alone. That is up 11 per cent from last year. The same level of profit increase, year to year, has been maintained for the last decade. These same big banks have been reducing their presence in many localities and neighbourhoods, closing 1,800 branches in the last two decades, tightening their risks and eliminating our poorest families from their customer list. No other Canadian sector is provided federal status guarantees for customer deposits or business loans. This privilege should be accompanied with strong corporate citizenship. However, it seems that, on the other hand, the banks view their corporate citizenship only if it is accompanied by high-level publicity, i.e., directed at their targeted customer. Therefore, in my perspective, these national banks are more interested in catering to the big boys than providing for their original calling, the federal charter, of being the banking system for all Canadians, not just a select few. Honourable senators, there are several reasons I believe that a rate of 35 per cent is right. First, in the early 1980s, interest rates were very high. The bank rate reached 21 per cent in 1981. Those who have mortgages will remember that. It was during that period that the federal government included interest rates of 60 per cent in the Criminal Code. (2150) With a criminal rate of 45 per cent, as amended by the committee, plus 21 per cent as the overnight rate — 21 per cent in 1981 — the criminal rate would be 66 per cent, higher than the rate in the current Criminal Code. Now, it may be that we never see these rates again — and I certainly hope so — but I think it is important to note that, looking at it historically, 45 per cent puts us in a position of possibly increasing the criminal rate above its current level in the future. Another reason is that it would be consistent with the rate limit imposed in Quebec. While other provinces, except Newfoundland, have taken advantage of the payday loans exemption to set short-term rates in the vicinity of $15 per $100 for two weeks, Quebec has taken a different approach and will not provide a licence to businesses unless they agree to keep rates under 35 per cent. This is not a legislated rate cap but, rather, is imposed by the government’s power to regulate licences, since the power to set interest rates is a federal constitutional power. Section 8 of the Consumer Protection Act in Quebec provides that: The consumer may demand the nullity of a contract or a reduction in his obligations . . . where the obligation of the consumer is excessive, harsh or unconscionable. This has been used by the Quebec courts, and, through this, the rate of 35 per cent was reached. It is important to note here that this means that a cap of 35 per cent has been court tested, and it has been determined, generally, that rates above this are unconscionable. In Quebec, this applies to loans under their licences, as in lease to own and all retailer loans, not just payday loans. Quebec provides a good example of how a system like this can be effective. The financial system has not collapsed in Quebec. People can obtain loans, and alternative options have arisen for short-term loans to those in need, for example, through Option consommateurs. Another reason for 35 per cent is that, in 2005, this very chamber approved this rate in Bill S-19. In 2005, we approved a 35 per cent criminal rate in this chamber, plus the Bank of Canada overnight rate. This bill was passed by the Senate but did not pass second reading in the other place because of an election. The bill received support from both parties in this chamber and the Banking Committee as they existed at that time. I also have a report that supports a rate of 35 per cent. This is a document from the National Consumer Law Center in the United States. I have had it translated and will distribute it to all senators, in both official languages, by email, as soon as I get to the office, I hope. The report is called Why 36%? The History, Use and Purpose of the 36% Interest Rate Cap. Now, I understand some of you may have noticed that this report says 36 per cent, but, considering the previous two reasons for 35 per cent, I believe rounding down one percentage point is appropriate. Plus, my bill, Bill S-237, adds the Bank of Canada overnight rate for flexibility. This report — and I strongly recommend that you take some time to read it — goes over the history of the interest rate cap in the United States and why 36 per cent is a generally accepted rate cap. The report is largely concerned with small-dollar and short-term loans. In Canada, we have carved out a specific niche for provinces to limit payday loans, specifically, a loan of $1,500 or less for a term of 62 days or less. As recent court cases have shown, this is a limited carve-out, and so the criminal rate remains important in this respect as well because it applies to all other financal products that are greater than the combined $1,500 for 62 days. To quote from the U.S. report: Interest rate caps are more than numbers: they are reflections of society’s collective judgment about moral and ethical behavior, as well as business and personal responsibility. Another quote from that report: Interest rate caps also reflect an assessment about the upper limits of sustainable lending that doe...”

Hon. Scott Tannas

June 19th
Hansard Link

Criminal Code Motion in Amendment

“...entian Bank Visa DOLLARS credit card. This is a standard credit card; it is not a premium card. The interest rate is 20 per cent, and the annual fee is $65. If a cardholder makes a purchase of $2,000 on this card and pays it back two months later, under the Quebec calculation, that would be 20 per cent interest, which would be legal. Under Senator Ringuette’s amendment, as it stands, it would be 39 per cent and illegal. In fact, the President of the Laurentian Bank could be handcuffed and sent to jail. That is the difference between the apples and oranges that we’re talking about. That’s one reason I’m troubled by the 35 per cent. At the committee, we took into account a number of considerations when we voted to set the criminal rate at 45 per cent. We heard testimony and agreed that the way it sits right now for the criminal interest rate, this is not the right statute to try and fine-tune and oversee this industry in Canada. This is a blunt tool that is meant to hammer people over the head. This is not the right way to fine-tune it. It was crystal clear to us that this industry needs significant regulation. Someone needs to be watching over what is going on. I was ashamed. I am one of the few living founders of a chartered bank, which I don’t own anymore so I have no conflict, but it is shameful what is going on at the edges of the financial loan industry in this country. Poor people are paying the bill. What is worse is that it’s poor people with integrity who are paying the bill because they are paying the interest rate while others borrow the money and don’t repay it, which is why the interest rate has to be so high in the first place. This issue definitely needs further oversight. We heard testimony that dropping the rate at this stage below 45 per cent could potentially suddenly dislocate customers who today rely on these loans. We have an interest rate at 60 per cent today. And we heard testimony from lots of folks that they are right up there at 59.9 per cent and doing a wonderful service for Canadians. A number of us did not buy that. But there were a number of more legitimate lenders that had large customer bases that were making, by their description — and, frankly, I believe them — a modest return at 45 per cent. We felt it would be risky for us to wade into the Canadian financial services industry with a blunt instrument and start dislocating customers from their access to credit, however faulty it is. We felt that 45 per cent was a start; it’s 15 per cent lower than it is today. We felt that it would help signal a change. It would bring some light to this issue with the government, who should be acting on this. We went one step further and said, “Let’s review this in three years.” If the government ignores it, we would come back to it. I think there was a will around the committee that if they ignore this bill over on that side, we will revisit this because, in our view, what is going on is not good. I want to leave you with a couple of other thoughts. As Senator Ringuette said, and she is quite right, the 60 per cent was set when the risk-free interest rate in Canada was 17 per cent. You could buy a Canada Savings Bond for 17 per cent. So if you wanted to make the dodgiest loan to the dodgiest customer, 60 per cent was maybe okay. But when the risk-free rate now is in the low single digits, 60 per cent can’t possibly be justified. However, we didn’t want to repeat the same mistake that they made in 1982 and put a number that was too low because we are clearly on our way up for interest rates. We are probably at the total opposite of where we were in 1982 with respect to interest rates. It was moderation, but a meaningful step, that the committee agreed to 45 per cent. ...”

Senator Lankin

June 19th
Hansard Link

Criminal Code Motion in Amendment

“... and neighbourhoods. I had the opportunity to speak last week, and I spoke about the history of the interest rate within Canada, but also within the U.S. The 36 per cent rate that they have landed at there is the appropriate rate. I find it interesting that the Canadian banking industry — and if you talk about the “Big Five,” many of them own operations in the U.S. BMO Harris Bank and TD have operations. Scotiabank is primarily in the Caribbean. I am sorry; I am coming to the question right now. These banks are complying with that 36 per cent interest rate or variations on it, depending on the state, in their jurisdiction. Did you look at th...”

Senator Tannas

June 19th
Hansard Link

Criminal Code Motion in Amendment

“... out $250 at an ATM and then paid it back in a month, you pay the $3.50 ATM fee and the 20 per cent interest rate on a month, which equals 37 per cent. That’s the issue. These are not the egregious on...”

Senator Ringuette

June 19th
Hansard Link

Criminal Code Motion in Amendment

“...e last decade. Coming back to the issue of 36 per cent, the same court judgment with respect to the interest rate and the fees attached to any kind of contract or paperwork, the banks in the U.S. have not ruled differently on this issue from the banks in Canada and the banks in Quebec. The Province of Quebec has decided that within their jurisdiction their way of providing some consumer protection is by the licensing of businesses. At the end of the day, I don’t buy the argument that we have to take into consideration the fees and that 45 per cent, at a time when the Bank of Canada rate is at 1.25 per cent, is good. At any Canadian bank right now, with a customer line of credit and no guarantee whatsoever, you can get a rate of 8.36 per cent. Why should the poorest of our poor Canadians have to say that they need a loan right now because they need to pay for a prescription for their kids or put gas in their car to go to work, for $12 an hour? Why should we be the ones to decide that what is most important in our line of thinking is the payday loan industry? Just Google “payday loan.” You will have at least 76 different entities operating in Canada, physically and online. I agree with Senator Tannas that no one — not the provincial or federal governments — is looking into this issue. It’s very nice to talk about the working poor and raising the standard of living in Canada, but these are day-to-day issues. And the only way we can deal with this issue is through the Criminal Code, because that is the only place where the Government of Canada issues an interest rate. That is the only means we have. (2220) So I certainly agree with Senator Tannas that ...”

Hon. Elizabeth Marshall

June 18th
Hansard Link

The Estimates, 2018-19 Main Estimates—Thirty-first Report of National Finance Committee Adopted

“...last year. The increase is attributable to an increase in government debt as well as an increase in interest rates. Honourable senators may recall that the government’s platform in 2015 committed to modest deficits and a balanced budget in 2019-20. This promise has long been forgotten and deficits are projected well into the future. The deficit for this year is projected to be $18 billion and government estimates that it will need to borrow $35 billion in addition to the refinancing of maturing debt. Last year, the Borrowing Authority Act was enacted, establishing a limit on outstanding government and Crown corporation market debt in the amount of $1.168 trillion. Outstanding government and Crown corporation market debt in 2018-19 is projected to be $1.066 trillion, about $100 million less than the legislated maximum. This includes $755 billion relating to government and $311 billion relating to Crown corporations such as CMHC, the Export Development Corporation and the Business Development Bank of Canada. To summarize, statutory payments include interest on government’s debt and interest expenditures are projected to increase as the debt increases and as interest rates rise, from $24 billion in 2017-18, to $26 billion in this fiscal year; then to $28 bi...”

Hon. Frances Lankin

June 5th
Hansard Link

Criminal Code Bill to Amend--Third Reading--Debate Continued

“...onoured to have the opportunity to speak to Bill S-237, An Act to amend the Criminal Code (criminal interest rate). I want to thank Senator Ringuette for her work on bringing this forward. It is an issue that we have been talking a lot about for a number of years. We have made some progress, but we need to make much more progress. If I may say at the beginning, you will find me sometimes referring to these alternate lending institutions as fringe lenders out in the community, as payday loans, even though they do other kinds of loans. We are not talking about payday loans. We’re talking about small loans, most often, and the usurious rate of interest on that. (2140) When we’re talking about what a criminal interest rate is, really we’re asking the question: At what point in time does an interest rate become predatory lending, and at what point in time does it become usurious? Those are the concepts that underpin Senator Ringuette’s approach to this. Again, as I speak, I hope you will allow me to come at this the way I learned about this issue myself, which was through dealing with poverty issues in the city of Toronto. I had the opportunity for a number of years in leading the United Way there to really delve in and, with our team, do what I think was really important research work around the nature of poverty and the nature of community where poor families were concentrated and what that meant. I’m going to just go through that quickly in a minute. I want to say first that there were many of us who engaged in poverty reduction strategies and looked at a number of issues, including the costs of being poor, which include a number of things, such as access to capital and loans, and at what rate they’re paid back. I just want to pay tribute to the work of Senator Omidvar and others with whom I worked, as well as Senators Eggleton and Segal, who did a lot of work on poverty reduction. A lot of people have contributed to this debate. When we did our first major piece of research about poverty and the existence of poverty — who was poor and where they lived in the city — we produced a report called Poverty by Postal Code. It examined 1981, 1991 and 2001 rates of family poverty. We used consistent measuring points all the way through. We saw a dramatic increase in the number of families living in poverty in Toronto compared to the floor data we had and compared to national statistics and the change in national statistics, which saw the rate of family poverty coming down at the same time over those 20 years that the rate of family poverty in Toronto was increasing. One the things we wanted to understand was how the supports and opportunities for people to access supports and services mapped against what their needs were. In our research, the key findings were that family poverty rates were rising, as I said; the concentration of family poverty was increasing, so families living in poverty were living in more and more concentrated areas within the city; and those neighbourhoods, the number of higher-poverty neighbourhoods — and there are, again, constant measures in what a high-poverty or a higher-poverty neighbourhood is — increased dramatically. In 1981, we were talking about a total of 30 neighbourhoods, and in 2001, we were talking about over 120 neighbourhoods. That’s a dramatic increase over that period of time. When we started to look at the supports and services, we found that, interestingly enough, if you mapped them, they overlaid with those neighbourhoods. However, that did not happen, by the way, for the supports and services being in the neighbourhoods where those people were and where they needed them; in fact, there were fewer supports and services in those neighbourhoods. We referred to them as under-served neighbourhoods. In fact, we coined the phrase “inner suburbs” because if you look at the map, you will see it was not the GTA surrounding Toronto and it wasn’t the downtown area; it was Scarborough, Etobicoke and a few others. It was very clear in its pattern. That brought us to question why supports and services weren’t there. There are a lot of reasons, but one of the easiest I can tell you about is the effect of the “sharp elbows” of the middle class. I didn’t invent this; this was analysis and research that had been done in a number of jurisdictions. It says that where parents have some capacity to organize on behalf of their families and kids for supports and services, they do that. Where they have the capacity, financially, to donate, you will see the schools in those areas have more supports and after-school programming. Where they have the ability to provide time and lead volunteer activities, like soccer, baseball or cricket leagues, or anything like that, you will find that those kids get access to those services. In poor neighbourhoods, where people are just struggling to get from day to day, get food on the table and pay the rent, you find there isn’t the capacity to build the social infrastructure in those neighbourhoods. It said to us there is a real job for all of us, collectively, to do. It’s a long story. There’s really great work and a lot of investments with philanthropists and government dollars coming together to leverage investment in those communities. At the same time, we started looking at some of the other features of these communities. Not only do they not have the support and the social infrastructure required, they didn’t have a lot of grocery stores. That’s interesting. Why is that? The money wasn’t there in those communities to support the large, brand, chain grocery stores. So where do people get their food? Convenience stores. What do they buy? Processed foods that cost more than what you would pay if you went to the grocery store. There is a cost to being poor; there is a premium cost to being poor. So one of the other things we started to think about was access to capital. Not only are there food deserts in which there aren’t grocery stores, there are also banking deserts. Bank branches were closing one after another in these neighbourhoods. The reason is that the bank model depends on a full range of supports and services. They sell mutual funds, insurance products and a whole range of ancillary products that are more than the families in these neighbourhoods, which might just need to cash cheques and do withdrawals, require. That kind of customer can’t support the full-service bank's costs. Some banks worked with us to try to bring in cheque-cashing operations, but it was difficult in their circumstance. They do their charity through philanthropy and not through their business model. While we had a couple of good experiments, it didn’t work, but it led us to wonder where people are getting their money if they require supports. It’s the same question as to how they get their food. Again, they go to convenience stores. How do they get their furniture, televisions and home furnishings? Rent-to-own stores have popped up in these neighbourhoods. We started to look at the fringe lending industry. We decided to do another piece of research to map where these fringe lending outlets were in the city of Toronto and how long they had been around. Over a period of a number of years — I won’t go into all of the statistics — but I can tell you that, again, the numbers just proliferated. In fact, if you look at the most recent report — 2016 — from ACORN, you will see there are over 1,500 across Canada. We were dealing with the Toronto area with the work we were doing, but over that period we examined, the numbers just grew. The other interesting thing is that if you look at that map and hold it up next to the map of the poverty neighbourhoods, they overlap. That is the customer base. That’s the market. Yes, up and down Yonge Street and across Bloor-Danforth, because those are major subway stops or access points. Outside of that, they’re all around in these neighbourhoods of Scarborough and Etobicoke, where there are concentrations of families living in poverty. So we know who the market is. We know that, along with other providers of service, whether it be convenience stores or rent-to-own stores, these costs of borrowing money are higher than what you would be able to get for a loan at a regular bank. However, if you are in a precarious situation financially, you’re not able to access that. Where do they get loans? They do so from fringe lending institutions. As I said, they know their market, and they know what they are doing. We began to do a lot of work with organizations around caps on payday loans, first, as well as raising the issue that Senator Ringuette has pointed out around usurious rates. In different provinces, different caps have been set, and it’s been an ongoing process to move the industry bit by bit. This was back in the mid-2000s that we were doing this work. We began engaging the provincial government. They started to move on examining caps. There were proposals and whatever. I can tell you that over the last few years they’ve done some good work. They moved a rate on payday loans from $21 for $100 down to $15 as of this year. Other provinces have done similar work, which is terrific. But in all of this, there is still the fact that that’s just the provincially regulated payday loan rate. The usurious rate, or the criminal interest rate, is contained in the Criminal Code, and that’s where we have to look to examine whether our numbers are right. (2150) The existing Criminal Code has a rate of 60 per cent. Senator Ringette’s bill proposed bringing the criminal interest rate down to 25 per cent, and the committee amended that and I believe landed at 45 per cent, and that is before us now. I want to make the case that the 45 per cent is entirely too high. I can understand that there are arguments that had been made around the actual cost of that business. It’s a higher-risk cost than some of the larger loans, et cetera, but is that rate the right rate? I can understand the committee’s concerns, but they probably heard from some in the industry, and I will make the case that 45 per cent is too high. The history on this, by the way, is very interesting. There is a report that Senator Ringuette shared with me that I would commend to you to read. It’s from the National Consumer Law Center. It’s entitled Why 36%: The History, Use, and Purpose of the 36% Interest Rate Cap. There is a little history section in there that takes us back. I find these things fascinating, like the prohibition work that I tried to understand with respect to looking at Bill C-45. On this one, right back to the last 100 years there have been debates about usurious interest rates. In fact, there was a time when there was a burgeoning industry — not regulated — cal...”

Senator Lankin

June 5th
Hansard Link

Criminal Code Bill to Amend--Third Reading--Debate Continued

“...ng such as postal banking, and they call for an amendment to the Criminal Code to lower the maximum interest rate from 60 per cent to 30 per cent. They go lower than the 36 per cent in the States, but...”

Hon. Kim Pate

May 23rd
Hansard Link

Criminal Code Bill to Amend—Third Reading—Debate Continued

“...raise the proposed new rate to 45 per cent. Senator Ringuette pointed out that, in Quebec, consumer interest rates are effectively capped at 35 per cent. The Quebec experience appears to support the common sense principle that economies in Canada can function and thrive without having to impose 45 per cent, let alone 60 per cent interest rates on the poor. I urge honourable senators to make the adoption of Bill S-237 one part of a broader program to address poverty and financial exclusion in Canada. I also urge, however, that given what we know about the economic impacts of predatory interest rates on the most vulnerable, we consider reinstating the original 20 per cent cap before adopting the bill. High-cost credit contributes to cycles of debt and poverty for the most marginalized members of our society. [Translation] According to Statistics Canada, one in seven Canadians lives in poverty. [English] Poverty hits hardest at the intersections of gender, race and disability: 28 per cent of racialized women and 33 per cent of women with disabilities live below Statistics Canada’s low-income cut-off, as do 36 per cent of Indigenous women living off reserve. Nearly one quarter of children raised by their mothers alone live in poverty as do fully half of the children with Indigenous status. The poverty experienced by children is exacerbated when their parents are forced to turn to high-cost credit to provide for them. And we know that for far too many, attempts to negotiate poverty can result in people doing things to make ends meet that can result in their criminalization, incarceration and separation from the families they struggle to support. Inequality and powerlessness are integral and inherent to predatory lending practices. While the wealthy have ready access to credit at affordable rates that are often below prime, the poor are regularly refused loans at mainstream financial institutions which forces them to rely on fringe lenders who charge usuriously high loan rates. Only yesterday I was speaking to someone who, a few months after obtaining just $100 from Cash Money — which is a business — ended up having to repay over $1,000. She described the shame of having to plead her case to others when the threat of the debt caused her to contemplate the possibility of homelessness or criminalization. She even considered suicide. She aptly described the predatory practices as follows: They make it so easy to get money, but sink you into huge debt at the same time. It’s a big trap and the door only goes one way . . . While “payday loans” are not covered by Bill S-237 as they are regulated provincially, they are perhaps the best known product offered by fringe money lenders. Many also offer credit in forms such as high interest instalment loans, which will be affected by the bill. Colleagues, try to imagine what you would do if you, like Helen Parry, a grandmother from Brampton who, according to CBC in 2015, was supporting two adult children on a salary that had not increased in eight years. She applied for a loan with a financial institution but was denied. She approached an alternate lender and was approved for a $3,100  loan to be paid back over 18 months. This was an instalment loan. A few months after she got her original loan, Ms. Parry got a call from her lender offering her more money with a longer repayment period. Ms. Parry agreed and ended up with a $5,100 loan to be repaid over 36 months. The lender told Ms. Parry the total obligation for the term of the loan would be $9,521.90. Peter Gorham, an actuary who provides certification on criminal rates of interest, calculated the effective annual interest to which Ms. Parry was subject to be 57.12 per cent. Worse still, if you included the “optional” loan protection insurance taken out by Ms. Parry, by the end of the 36 months she would have repaid a total of more than $13,400. With this product added, Mr. Gorham estimated the effective annual interest rate to which she was subjected was actually 120.3 per cent. These are the types of products the amendment in Bill S-237 is addressing. When she testified at committee, Courtney Mo of Momentum, an anti-poverty organization in Calgary, highlighted the issue of interest rate inequality when she advised that: Those who can least afford to borrow end up paying the most. She further observed: These loans are regularly used to cover basic needs. That means that people living on a lower income are effectively paying 60 per cent interest or more on their groceries, their rent or diapers. The evidence supports these observations. A recent survey found that those who turned to high-cost credit overwhelmingly use it to pay for food, housing, bills and to alleviate poverty. In fact, nearly one in three respondents reported using high interest loans to pay for food. To make matters worse, many on social assistance take the risk that the money they borrow will count as “income” or “assets” and be deducted from their social assistance. This bill will help to curb the most egregious predations of fringe lenders by lowering the usury cap for household borrowing from the current unconscionably high rate of 60 per cent to one of 45 per cent over the Bank of Canada’s overnight rate. I believe that we can and must do better. A 45 per cent interest rate is still too high when we recognize it for what it is: a premium that the poorest pay when they borrow to meet their basic needs. Honourable senators, in addition to passing Bill S-237, we must turn our attention to the realities of the devastating and invasive reach of the tentacles of poverty and the impact of financial exclusion. When people resort to high-cost credit, it is not because they don’t understand that the cost of borrowing from fringe lenders is higher than it is at the bank. It is because, by reason of poverty, systemic biases or geography, mainstream financial institutions are not welcoming or accessible to them. Simply put, most mainstream banks are not interested in their business. Researchers call this “financial exclusion.” The evidence shows that the people who are most affected by financial exclusion include those with low incomes, Indigenous peoples, women and single-parent families. To ensure an adequate response to the problem of high-cost credit, the federal government must exercise its power to regulate banking in ways that promote equality of access to basic banking services, including affordable credit, for all, particularly those who are most vulnerable, the poor. [Translation] We must also create a more just society by ensuring that every Canadian has enough income to meet their needs and those of their family. [English] Professor Jerry Buckland, whose book Hard Choices is the most comprehensive study of financial exclusion in Canada, writes that “probably one of the best ways to overcome financial exclusion is to address poverty.” One the ways Canada could redress the inequity of poverty is currently being experimented with by the Government of Ontario. The Ontario Basic Income Pilot project involves two groups: the basic income group who receive monthly basic income payments for up to three years and the comparison group who do not receive monthly basic income payments but will actively participate in the research study. Third party evaluators then compare people in these two groups to see whether basic income helps people living on low incomes better meet their basic needs and improve their education, housing, employment and health. (1520) Implementing a guaranteed livable income in Canada could ensure that everyone has the economic means to facilitate access to reasonable, affordable credit. More important, it could create a society in which people could meet their basic needs without having to borrow. [Translation] Honourable colleagues, in light of the points I just made, I support Senator Ringuette’s efforts to reduce the criminal interest rate for personal, family, and household loans. [English] This bill takes an important step...”

Hon. Pierrette Ringuette

May 8th
Hansard Link

Criminal Code Bill to Amend—Third Reading—Debate Adjourned

“moved third reading of Bill S-237, An Act to amend the Criminal Code (criminal interest rate), as amended. She said: Honourable senators, I move that this bill be read the third time.”

Hon. Lucie Moncion

May 8th
Hansard Link

Criminal Code Bill to Amend—Third Reading—Debate Adjourned

“...rable senators, today I will be speaking to Bill S-237, An Act to amend the Criminal Code (criminal interest rate). I will start by saying that I support this bill and the proposed amendment, even though I don’t think we are doing enough to find solutions to debt problems in Canada. This bill addresses a delicate subject that encompasses criminal interest rates, easy access to short-term credit and household debt. In recent years, there has been an increase in the number of companies like Money Mart and Fast Cash, which became lenders of last resort for people with urgent cash-flow needs. These payday loan companies offer an alternative to regulated financial institutions that refuse or are unable to accommodate a clientele with very specific needs. [English] In most major Canadian cities, we have witnessed the multiplying of these companies which can lend up to $1,500 for up to 62 days at rates ranging from 15 to 25 per cent monthly. These companies have significant interest rate flexibility with the current maximum criminal rate set at 60 per cent. Since these loans do not exceed 62 days, the interest charged remains within the limit of the act. However, on an accrual basis, the rate can represent 300 per cent over a year when the loan is renewed every 62 days. [Translation] Payday loan companies do more than just offer payday loans. They also offer term loans of up to $15,000 over 60 months. They provide services in their branches and online, and will even send a representative to your home or workplace. It is a highly lucrative, easily accessible market that benefits a large number of private investors and a clientele with very specific needs. The public, politicians, and the media do not think favourably of payday lenders and generally cast them in a negative light. Despite their unfavourable reputation, this industry provides a service to cash-strapped Canadians. [English] A 2016 survey conducted by the federal government of 1,500 Canadians using approved payday lender services provides the following statistics as to the reasons why people use a payday loan: 27 per cent of people said that a bank or credit union would not lend them money; 15 per cent of people said they did not have time to apply for a loan from a bank or credit union because the process was much too long; 13 per cent of people said that they did not want to borrow money from a bank or credit union; 55 per cent of people said payday loans offered them the best customer service; 90 per cent of people said payday loans were the fastest and most convenient solution; 74 per cent of people said that payday loans were the best solution available to them. [Translation] According to a 2016 report by the Conference Board of Canada based on data collected in 2014, licensed payday lenders provided nearly $4.5 million in short-term loans to Canadian households, with a total loan value of $2.2 billion. Again according to that same report, these loans were provided almost exclusively to two distinct categories of clients. The first category is described as follows: The first category, “ALICE” — which stands for “asset limited,” “income constrained” and “employed” — is a relatively financially vulnerable customer who relies on payday loans to cover the cost of both periodic, unexpected expenses and ongoing necessities. ALICE customers’ lack of an established asset base severely restricts access to alternate consumer credit through conventional financial channels. (1710) According to the report, the second category is described as follows: Asset rich, temporarily illiquid customers [who] are more economically stable, but use payday loans as interim financing to cover unexpected expenses. [English] Many users of licensed payday lenders have no idea of the costs associated with the loans they incur. One of the recommendations of the Conference Board’s report is to put in place better education in this area, primarily to protect the financial well-being of Canadians who use payday loans. However, this report warns that politicians should be cautious before considering the possibility of making changes to the fee structure of these loans. Given the costs borne by payday lenders due to the high rate of delinquency, the capping of fees could make this activity unprofitable for approved lenders and increase the risk of borrowers turning to the market for unaccredited lenders who offer their services on the Internet. [Translation] What about Canadian financial institutions? What role do they play in this? I don’t want to make a pitch for regulated Canadian financial institutions. I simply want to set the record straight because people like to criticize them for not being open to vulnerable people who are struggling with debt, whether that debt has to do with payday loans or something else. It is important to point out that Canadian banks and credit unions play an important role in the economic stability of our country and our provinces. They are subject to rules and laws that govern how they operate. Those rules and laws are put in place by the various levels of government and deposit insurers. They cover liquidity, reserves, bad debt provisions, credit limits, debt service ratios and cost of borrowing disclosure. Licensed payday lenders don’t have to follow these rules. Every month, Canadian financial institutions provide financial information about their assets, liabilities, bad debt, reserves and liquidity, which is useful in managing Canada’s treasury and creating an accurate, up-to-date picture of the risks to our country’s financial stability. Despite the fact that many of them would like to intervene and help improve Canadians’ financial situation, financial institutions are caught in a regulatory stranglehold that limits their flexibility and prevents them from extending credit to high-risk customers. As result, people in need are forced to turn to payday lenders. [English] The objective pursued by Senator Ringuette is very commendable, and I congratulate her for wanting to offer solutions by proposing Bill S-237. Originally, the senator proposed that the criminal interest rate be set at 20 per cent plus the daily borrowing rate of the Bank of Canada. The proposed amended rate is set at 45 per cent. That is first step. Chartered payday loan companies who testified indicated that if the criminal interest rate was less than 46 per cent, they would have to reconsider their procedures, since their transaction costs would be too high and it would not be profitable for them to offer these services. This issue needs to be explored further to ensure that there is a real balance between the risk that payday lenders face and the profit they generate from their operations and the higher rates assumed by Canadians who resort to payday loans. [Translation] The provincial legislation governing the payday loan industry in Canada already provides protections against consumer exploitation. There are caps on the fees that payday lenders can charge. There are also standards governing the disclosure of information, but they are flexible. Payday lenders are required to provide borrowers with clear and understandable information. The interest rate and borrowing fees are thus clearly set out in the contract. This information covers only 62-day loans. Borrowers who request refinancing at the end of the 62-day period continue to receive the same information, since the rate is not cumulative. If it were cumulative, the cost of borrowing would exceed the criminal interest rate of 60 per cent. During our study, we met with pawnbrokers in Quebec. Despite the fact that this type of loan seems different, it is actually quite similar to what is being done elsewhere in Canada. The regulated annual interest rate in Quebec is set at 35 per cent. However, the interest rate on pawnshop loans is 22 per cent per month, which is an annual interest rate of 264 per cent. What is more, when the borrower does not pay the interest within 10 days of the end of the loan contract, the item that was pawned, which is worth four times the amount of the loan, is put up for sale. [English] There are measures to prevent abusive situations, but it seems that they are investigated neither in Quebec nor anywhere else in Canada. The Ontario government is seeking to further regulate this industry by imposing a waiting period between loans, the amounts that can be borrowed and the number of times a person can borrow. Payday lenders are not happy with these upcoming changes or the proposed Bill S-237. Our provincial governments are looking for solutions to this form of debt and have approached cooperative financial institutions to see if they can help improve the situation. [Translation] Some of them, including Vancity Credit Union in Vancouver and Alterna Savings in Ottawa, have proposed programs that will help people struggling with debt or cash flow problems take charge of their finances. It is a start, but it is too little considering the extent of the problem and the current market needs. These programs need a real boost from our elected officials and could be supported by grants enabling financial institutions to increase the frequency and range of programs that help Canadians at risk get better control over the management of their personal finances. [English] In its regulation for approved lenders, the Ontario government has introduced a component called the Payday Credit Awareness Fund. This fund is fully subsidized by approved payday lenders and is intended to educate users in this form of funding. The implementation of education programs in financial literacy, savings and credit education would be very useful and would contribute to a better understanding by individuals in the management of their assets. [Translation] Dear colleagues, I invite you to vote in favour of this amendment to Bill S-237. Although it falls short of Senator Ringuette’s objective of lowering the criminal interest rate below 25 per cent, it is a first step towards improving the cost of short-term debt in...”

Senator Ringuette

May 8th
Hansard Link

Criminal Code Bill to Amend—Third Reading—Debate Adjourned

“... if she understands that unique loans of up to $1,500 for up to 62 days must comply with provincial interest rate regulations. All other financial products that do not meet those criteria are under fe...”

Senator Moncion

May 8th
Hansard Link

Criminal Code Bill to Amend—Third Reading—Debate Adjourned

“...or approved lenders such as payday lenders, only loans of up to $1,500 are considered payday loans. Interest rates on loans at the $15,000 mark may not exceed 60 per cent and amortization periods may be up to 60 months. Things get interesting with that 62-day period because people sign new contracts every 62 days. Calculate the cumulative interest over 12 months, and that interest rate is much higher than 22 per cent or 25 per cent. It can be as high as 300 per cent. I’m...”


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